Problem 11-9 Weight of Equity (LG11-4) FarCry Industries, a maker of telecommuni
ID: 2784827 • Letter: P
Question
Problem 11-9 Weight of Equity (LG11-4) FarCry Industries, a maker of telecommunications equipment, has 3 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 10,000 bonds. Suppose the common shares are selling for $29 per share, the preferred shares are selling for $15.50 per share, and the bonds are selling for 98 percent of par. What would be the weight used for equity in the computation of FarCry’s WACC?
Weight used = %
Problem 11-12 Weight of Debt (LG11-4)
OMG Inc. has 4 million shares of common stock outstanding, 3 million shares of preferred stock outstanding, and 5,000 bonds. Suppose the common shares are selling for $28 per share, the preferred shares are selling for $27 per share, and the bonds are selling for 108 percent of par.
What weight should you use for debt in the computation of OMG’s WACC?
Weight used = %
Explanation / Answer
We = Weight of Equity = Market value of equity / Total market value of all securities
= 87,000,000 / 200,500,000 = 0.4339 (or) 43.39 % ................final answer
working needed
Question - 2
Weight of debt = Market value of debt / Total market value = 5400,000 / 198400,000 * 100 = 2.72%.......final answer
Shares Rate Value Market value of equity 3,000,000 29 87,000,000 Market value of preferred stock 1,000,000 15.5 15500000 Maket value of bonds 10,000 9800 98000000 Total market value 200,500,000